Election 2012: How Will It Affect Delaware?

Better Times Ahead?: The presidential election could affect the state’s economy.

by Doug Rainey

As Delaware lurches toward Election Day, it is easy to get caught up in the heat of the battle between the two parties.

But after the first Tuesday, we will be left with the question of what a second term for Barack Obama and Joe Biden, or a victory by Mitt Romney and vice presidential running-mate Paul Ryan will mean for the Delaware economy.

Let’s get one thing out of the way. Barring a big surprise, Delaware government will remain under the control of Democrats, with Gov. Jack Markell expected to coast to a second term.

Peering into the future is a risky exercise, and after mulling over an array of possibilities, I turned to James Butkiewicz for his thoughts. Butkiewicz chairs the Department of Economics at the Lerner College of Business and Economics at the University of Delaware.

What follows is a blend of observations on what we might see with Romney in the White House or if Obama hangs on for a second term.

Butkiewicz says Delaware will benefit from the candidate who can do the best job of handling the national economy.

The days when the First State could thrive, regardless of how the overall economy performs, vanished long ago.

“Since 1976, employment growth in Delaware has been slightly faster, but largely mirrored growth in the national economy,” Butkiewicz says.

That has not stopped Republican gubernatorial candidate Jeff Cragg and his running-mate for lieutenant governor, Sher Valenzuela, from claiming that overspending and over-regulation hold back the economy. Valenzuela spent a brief time in the spotlight with a speech in late August at the Republican National Convention. Cragg and Valenzuela both own businesses.

On the national stage, taking bold steps will be difficult for either Obama or Romney, thanks to the deficit.

“Spending and taxes must be aligned to balance the budget, although each candidate proposes a different approach to restore fiscal health,” Butkiewicz says.

Although details have not been spelled out, Romney and Ryan propose tax cuts for all, with Obama and Biden continuing to propose a tax increase for those with higher incomes.

Spending cuts remain a murky area, with both sides light on specifics. For his part, Romney proposed cutting spending for arts, public broadcasting and Amtrak, the federally owned passenger railroad that employs 1,000 in Delaware, according to an interview in Fortune Magazine.

As a member of the House, Ryan has introduced detailed plans to slash spending, but it is unclear how many of his proposals would be adopted by Romney.

Amtrak has been on the chopping block for decades, as reflected by the $1.5 billion in federal money it receives every year. That amounts to the cost of a couple of major projects on Interstate 95.

The Obama administration and long-time Amtrak commuter Joe Biden remain strong supporters of the rail system and will keep pushing a plan to use public and private partnerships to add more high-speed lines around the country. That has led to criticism of the administration from some Amtrak backers who say the bulk of funding should go to the Northeast Corridor.

One likely victim of the process is the former General Motors plant near Newport that seemed destined to produce the Fisker Atlantic mid-sized hybrid sedan. The U.S. Department of Energy suspended the federal loan to be used to overhaul the plant that last produced a two-seater Pontiac sports car.

Romney has made the Fisker loan into a campaign issue, although the program came out of legislation—signed by President George W. Bush—aimed at encouraging production of fuel-efficient vehicles.

“If the Fisker money is not already dead, it will be,” Butkiewicz says.

A big question mark is the legislative branch. “If Congress remains divided, or if the majorities are from the opposite party, either candidate may have difficulty enacting his desired programs,” Butkiewicz says.

This also holds true for Romney’s vow to repeal the Affordable Health Care Act, also known as Obamacare. The task will be far more difficult for Romney if Democrats only lose a few seats in the Senate. It would be comparable to the current gridlock we’ve experienced.

You can’t rule out a compromise with Democrats on a budget package that could add to confidence in the business community. Prospects are dimmer for an Obama administration deal with the GOP, although pressure from the business community could build, especially if the economy stalls.

While many believe that Romney prefers to seek deals with the opposition, he is hemmed in by the GOP base that wants no tax or revenue increases. Ryan, a fiscal conservative, could hold the key to bringing conservatives into line on a budget deal.

As for the European debt crisis and recession, Butkiewicz sees the situation holding down economic growth in the United States, but not to the point of affecting decisions by either Obama or Romney to move forward with their economic proposals.

The impact of federal spending cuts in Delaware may be somewhat limited, due to the lack of federal facilities or companies doing business with the government.

Butkiewicz cites Tax Foundation data that ranks Delaware 44th out of the 50 states in the ratio of federal dollars received to federal taxes paid. In 2004 and 2005, Delaware received 77 cents on each dollar of federal taxes paid.

Dover Air Force Base, the one major federal installation in the state, has survived base realignment and closing decisions and seen continued investments in new buildings. While the investments are a big plus, the state’s congressional delegation and local officials work hard to retain strong ties with the Air Force.

Regardless of the social issues swirling around the campaign, Butkiewicz says the economy remains the top concern. The marching orders that went out in the 1992 presidential campaign of Bill Clinton—“It’s the economy stupid”—remain true, says Butkiewicz.